On: YC W22 Stablegains is being sued for losing $42M in funds from 4878 customers

[Khoth]

Why were people willing to pay a three digit APR yield to borrow assets then just keep those assets doing nothing at all?

[renonce → Khoth]

High APR = High Total Value Locked (TVL) = Potential to steal someone's money = Attract crypto investments

[nootropicat → Khoth]

Nobody paid that in borrowing, that APR was generated by minting new tokens that could be sold to someone else.

[Khoth → nootropicat]

Isn't that precisely a ponzi scheme?

[nootropicat → Khoth]

Generated tokens were different than what you had to deposit to get them. Deposited funds were (almost always) completely safe.

[nrmitchi → nootropicat]

If you were doing this though (using funds to mint other tokens to sell), the principle was clearly not in USD, so there was still a risk of the bottom falling out on whatever you were holding funds in.

You also can't really add "almost always" to "completely safe". It's either "completely safe", or it's not. This statement is just "it works 100% of the time 65% of the time", but with words rather than numbers.

"It's 'completely safe', until it's not" which is exactly the point that I and others in this thread started with.

[nootropicat → nrmitchi]

>If you were doing this though (using funds to mint other tokens to sell), the principle was clearly not in USD

It was often in usd.

>"It's 'completely safe', until it's not" which is exactly the point that I and others in this thread started with.

The meaning was: almost all smart contracts were safe, meaning you had to at least check the code before depositing.